1:100 Is The Preferred Leverage

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47% of the responses to my poll prefer a leverage of 1:100, a high leverage. What does say about forex traders?

High leverage is common in forex, more than in any other market. Small movements in currencies make big profits, or big losses. Veteran traders told me that the desired leverage is no more than 1:10, and 1:20 in extreme cases.

But most traders take a different stand. It’s no wonder that some brokers offer a leverage of 200 or even 400. There are people who are willing to use such a leverage. If there are buyers, there are sellers.

In the small poll that I made, 47% said 1:100, 17% said 1:50, 14% said “as high as my broker allows me”, 11% said 1:10 and same percentage said 1:5.r

No one went for the “No Leverage” option. Playing safe isn’t the trend in forex trading…

I must say that my poll was quite modest (36 participants at the time of writing), but I do believe that it reflects the current trends in forex trading.

I’ll leave the poll open to answers. If there are many more answers, I’ll write a follow up post.

Happy forex trading, and may you leverage your money to profits and not to losses!

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

3 Comments

  1. Pingback: CFTC 1:10 Leverage Proposal - Act Against It | Forex Crunch

  2. Chase Richards on

    Yeah that’s interesting. I talk to a lot of the folks in the reddit Forex community and the general consensus is that people want as much leverage as possible, “to make as much profit as possible”.

    Usually, I assume that means because they don’t really understand how leverage works. Nor do they understand the law of averages or what it means to truly have an edge in the market, and to trade it.

    I personally have a very small account, and I keep my leverage at 1:40 – which is already uncomfortably high for me. But I kind of have to because otherwise I can only take 1 or 2 trades at a time.

    A more interesting question, maybe, is “What % do you risk on a trade?” Because even with 1:200 leverage I can risk only 1% per trade, or I can bet the farm. Leverage only dictates your capacity (or headroom) to overtrade. But it’s a tool nonetheless.

    Let’s say you have $1 million total investing capital. Would you put it all into a Forex account? Probably not. I’d have the bulk of it in more stable investments – some stocks, bonds, cash, property, etc. Regular diversification styles. But maybe I have 5% of it total in my Forex account.

    Higher leverage would allow me to make gains based on a larger percentage of my total equity – not just my Forex account’s equity. So I could trade to risk only 1% of my $1 million by using high leverage, and just keeping enough in my Forex account to cover margin.

    I don’t have a million dollars. But if I did, that’s how I would use leverage – so that a relatively small deposit would allow me to take risks and make profits that are meaningful when compared to my total equity.

    • Thanks for your comment Chase! Leverage is yet another tool, but it has to be used wisely: not all the eggs in the same basket: not in forex in general and not in one specific trade.